From the U.S. Government Accountability Office, www.gao.gov
Transcript for: Watchdog Report: FEMA’s Administration of the National
Flood Insurance Program
Audio interview by GAO staff with Orice Williams Brown, Managing
Director, Financial Markets and Community Investment
Related GAO Work: GAO-11-297: FEMA: Action Needed to Improve
Administration of the National Flood Insurance Program
Released on: June 9, 2011
[ Background Music ]
[ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and
information from the Government Accountability Office. It's June 9,
2011. The National Flood Insurance Program provides policyholders with
insurance coverage for flood damage. A group led by with Orice Williams
Brown, the Managing Director of GAO's Financial Markets and Community
Investment team, recently reviewed the challenges facing the program.
GAO's Jeremy Cluchey sat down with Orice to learn more.
[ Jeremy Cluchey: ] Given the recent rampant and devastating flooding in
Mississippi and elsewhere in the country this season, can you talk about
the role that the National Flood Insurance Program plays in recovery
efforts?
[ Orice Williams Brown: ] The National Flood Insurance Program is one of
the key federal programs to help homeowners recover from flooding. Since
the 1970s, the National Flood Insurance Program has been the primary
vehicle for homeowners to purchase flood insurance. They generally are
able to purchase the policies through the companies that sell
homeowners' insurance, and they do specific underwriting for the
National Flood Insurance Program. So this is -- is a key federal
program, in terms of helping homeowners recover. One of the key issues
with the National Flood Insurance Program is that it currently owes just
under $18 billion to the Treasury, associated with losses experienced in
the 2005 hurricane season. And since that time, the program has been
able to make some payments of interest and principal to the Treasury. In
any year that there are elevated levels of flooding, and there are
increase -- increases in claim activity -- they run the risk of not only
not being able to repay principal and make their interest payments, but
they also risk having to borrow additional funds from Treasury to cover
increased claim activity, as well as the possibility of having to borrow
funds to cover their interest rate payments, to Treasury.
[ Jeremy Cluchey: ] Is this one of the reasons that the National Flood
Insurance Program was added to GAO's high-risk list?
[ Orice Williams Brown: ] Yes. In 2006, GAO put the NFIP on its
high-risk list, primarily because of the losses associated with the 2005
hurricanes. And there were also a number of structural concerns that we
raised, in terms of the program's ability to charge rates that actually
reflect the risk of flooding. Since that time, NFIP has remained on
GAO's high-risk list, because Congress has yet to address the structural
issues with the program. But also, we've identified a number of
managerial and operating challenges that FEMA needs to address, in terms
of managing and overseeing the program.
[ Jeremy Cluchey: ] Can you elaborate a little bit on what these
challenges are?
[ Orice Williams Brown: ] Yes. FEMA has struggled in terms of dealing
with managing the program, from the perspective of having a strategic
plan for the National Flood Insurance Program; for making sure that it
has the human resources and the skills necessary to manage the program.
They've also experienced a number of operational issues associated with
some of their information technology activities.
[ Jeremy Cluchey: ] What steps can FEMA take that could potentially help
them to overcome these obstacles?
[ Orice Williams Brown: ] GAO has recently issued a report that's laid
out a number of specific actions that FEMA could take, that will improve
its oversight, management, and operation of the program. Specifically,
we've recommended that the particular office within FEMA develop its own
strategic plan for the National Flood Insurance Program. We've also
recommended that they come up with a human capital plan and a
contingency plan that will enable FEMA to be able to manage the program,
when there are emergencies elsewhere in the country.
[ Jeremy Cluchey: ] For people living in the regions affected by this
flooding, what's the take-away here?
[ Orice Williams Brown: ] The biggest take-away is that flooding
continues to be one of the major contributors of natural catastrophes in
the United States. We found that 90 percent of natural catastrophes
involve flooding, and every state in the union is susceptible to
flooding. So it's important to know the risk of flooding in your
particular area. It's also important to keep in mind that the National
Flood Insurance Program continues to be a key part of [background music]
helping communities recover from flooding in the United States.
[ Background Music ]
[ Narrator: ] To learn more, visit GAO's Web site at GAO.gov and be sure
to tune in to the next edition of GAO's Watchdog Report for more from
the congressional watchdog, the Government Accountability Office.